Professor Marianna Fotaki, Professor of Business Ethics at Warwick Business School commenting on criticism from the IMF today of the terms of a bailout deal for Greece, asks the question, will the International Monetary Fund (IMF) persevere in its decision to refuse participating in a deal that does not stand any chance of coming true?
"EU leaders have reached agreement that paves the way to a third bailout, if the Greek parliament approves the new even tougher austerity measures. These measures continue the same failed recipy of austerity which caused the Greek economy to contract by 25% in the last 5 years while making 26% of all Greeks unemployed with youth unemployment exceeding 60%. The VAT hike reaching 23%; the increased taxation on businesses paid upfront; the steep increase in contributions to the insurance fund by farmers and pensioners, are only a few of the new savage measures demanded by the EU, all of which are very likely to supress the Greek economy even further. The terms enforced by the creditors on the hapless Greek PM on Monday morning after a 17-hour marathon of negotiations are truly bad for economy, but they are even worse for democracy and spell trouble for the future of the EU project.
In order to sell this deal to the Greek Parliament Alexis Tsipras is making plainly false statements about avoiding transfer of Greek assets abroad as collaterals for the new bailout funds of over 80 billion Euros and avoiding the further contraction of the Greek economy; In fact the opposite is true. More troubling is the absence of any firm commitment to debt restructuring which is essential for Greece to restart its economy. However, this is still up in the air. Alexis Tsipras has little to show for the tough and humiliating measures he was forced to accept (as he admitted in a televised interview last night on the Greek state TV), other than averting a total collapse of the Greek economy if the country is forced out of the Euro.
The IMF is therefore right to demand that "Greece’s debt can now only be made sustainable through debt relief measures that go far beyond what Europe has been willing to consider so far." The debt restructure with a grace period of 30 years and repayment schedule of many more decades that the IMF argues for, introduces belatedly some reality check into this heavily politicised process which is based on dogmatic thinking and narrowly conceived self-interest by the dominant EU players. The IMF is right to refuse participating in a deal that does not stand any chance of coming true. The question is: will it persevere in its decision?"
Communications Manager, University of Warwick
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